Then a Hawaii nonprofit corporation could be the place to start. Forming a corporation lets you receive tax exemptions, apply for grants and receive donations. More than 6,800 nonprofits served the Hawaiian community in 2016, and generous Hawaiians gave over $625 million.
This article is a step-by-step guide showing you how to form a nonprofit corporation in Hawaii. It also answers some of the most common questions about forming a Hawaii nonprofit corporation.
Steps to Form a Hawaii Nonprofit Corporation
Select initial directors
In Hawaii, a nonprofit corporation must have three or more directors who aren’t related.
Choose a name
The name of your nonprofit can’t be the same as any other business on file with the Hawaii Department of Commerce and Consumer Affairs. The state has a searchable database, but it isn’t definitive. You should wait for a response from the Department before finalizing your name.
If your preferred name is available and follows state naming guidelines, you can reserve it with the state for 120 days. You also have the option to use ZenBusiness’s name reservation service. Let us take care of the paperwork for you while you concentrate on other steps.
Before finalizing your name, you should consider whether it’s available online. A domain that aligns with your business name can be key to getting online exposure. ZenBusiness has a domain registration service that can secure your domain name so no one else takes it.
Choose a Hawaii registered agent
A registered agent is a person or entity that accepts official correspondence from the state’s business formation agency in the state and legal documents such as lawsuits. All registered agents in Hawaii must be physically present in the state. They can be either an individual or an entity that’s authorized to do business in Hawaii.
It’s possible for a corporation’s director or officer to be the registered agent, though there are disadvantages. Because the registered officer must be available during business hours, it ties you to the office. Consider ZenBusiness’s registered agent service to have someone available to accept official correspondence, upload it to your dashboard, then forward it to the designated person at your corporation promptly.
File Articles of Incorporation with Hawaii
To file Articles of Incorporation as a domestic corporation, find the corresponding form on the Department of Commerce and Consumer Affairs website. It asks for basic information, such as the name of your charity, the name of your registered agent, and your nonprofit’s purpose. You can file by fax, in person, via mail, or online. You can find all the forms and payment information on the Department of Commerce and Consumer Affairs’s website.
Foreign (out-of-state) charities must file an Application for a Certificate of Authority for Foreign Corporations. You need to attach a Certificate of Good Standing from the state or country where you originally incorporated. It must be dated no more than 60 days prior to filing with Hawaii.
If you’re planning to apply for 501(c)(3) status, make sure you include the wording that the IRS looks for. This wording relates to your purpose, dissolution of the charity, and a statement that you won’t engage in activities unrelated to your purpose. The IRS has a guide with advice on the wording required on their website.
Create corporate bylaws
Your corporate bylaws must comply with Hawaii’s laws and cover procedures for meetings, electing officers, and taking care of other formalities. You should also create a conflict of interest policy to protect your nonprofit.
Hold organizational meeting for board of directors
The organizational meeting is the first meeting of the board of directors. This is when you’ll approve bylaws, appoint officers and directors, set term limits, and determine your tax and fiscal year. You may also need to approve initial transactions, such as opening a bank account. You’ll also want to designate someone to take the minutes of all meetings.
Set up a corporate records method
Important documents, such as your bylaws, Articles of Incorporation, and minutes must be kept. Most corporations use a records binder, but records can also be stored electronically in the cloud. Just make sure that all records remain secure.
Get tax ID numbers
You need a federal Employer Identification Number (EIN) before submitting your application for tax exemption. You can get one through the IRS or let ZenBusiness’s EIN service take care of the paperwork for you.
You also need to register for Hawaii state taxes. Hawaii has the General Excise Tax (GET) instead of a sales tax. The Basic Business Application registers you for the GET and ensures you have a Hawaii Tax Identification Number. This form is also used to apply for certain business permits.
Apply for Hawaii licenses and permits
You don’t need a statewide business license to operate a nonprofit in Hawaii. However, you may need to register with your city or county. There may also be federal permits, depending on your industry. ZenBusiness’s business license report service can help you identify any business licenses you may require.
You should note that lotteries and raffles are considered gambling in Hawaii and are a misdemeanor. Charities can only hold lotteries under very narrow circumstances. Make sure you understand these before conducting one.
Apply for tax-exempt status
To gain 501(c)(3) status you need to apply to the IRS using form 1023. There’s a long version and a short one. Fill out the one that best fits your nonprofit. You’ll have to use specific language suggested by the IRS to make sure you provide them with everything they need. Once you receive a letter of determination from the IRS, you’re automatically exempt from state income tax in Hawaii. However, you do need to apply for exemption from GET with the Hawaii Department of Taxation.
Register as a charity with the state
Hawaii nonprofit corporations that intend to solicit donations must register with the Attorney General’s Tax and Charities Division.
Acquire insurance for your nonprofit
Each nonprofit’s insurance needs differ greatly depending on its size, assets, and the work it does. If you have employees, you need unemployment insurance and workers’ compensation. It’s best to talk to a qualified insurance agent to determine your insurance needs.
Open a bank account
Opening a bank account for your Hawaii nonprofit corporation helps keep your finances separate. Paperwork the bank will need includes:
- Copy of your bylaws
- Hawaii Articles of Incorporation
Some banks may also ask for a resolution authorizing you to open an account in the corporation’s name, especially if there are multiple directors.
Ready to Kick Start Your Business?
At ZenBusiness, we are proud to support small businesses through a variety of different tools and services. Whether you need a registered agent service, want to reserve a business name, or looking to register a domain, our goal is to help you stay on the road to success. Check out our services, and contact us today to see how we can help you grow your company.
Hawaii Nonprofit Corporation FAQ
Can the founder of a Hawaii nonprofit receive a salary?
Founders, who work as employees, can receive a salary for work they do as long as the salary isn’t excessive.
What happens if a Hawaii nonprofit makes money?
Any money that a nonprofit makes must be reinvested in the charity or spent on the nonprofit’s purpose. Money earned can be saved to pay for future expenses.
What kinds of businesses can be a nonprofit in Hawaii?
To receive tax-exempt status with the IRS, an organization must be formed for religious, charitable, scientific, literary, or educational purposes. There’s a wide range of ways to further these causes, and nonprofit corporations include colleges, food banks, and hospitals.
Can Hawaii nonprofits sell products?
Nonprofits can sell products to raise money and awareness about their cause. However, if you sell products to make an income in Hawaii, the income is subject to GET. This is the case even if the profit is used to fund your exempt cause. Make sure you check the laws and follow the tax guidelines in the state.